GT Advanced employee incentive plan orders remanded to address errors

By Caroline Salls

Pittsburgh, July 21 – A federal district court sent an order denying approval of GT Advanced Technologies Inc.’s key employee incentive plan and key employee retention plan back to the U.S. Bankruptcy Court for the District of New Hampshire to address errors raised on appeal, according to an order filed Tuesday with the U.S. District Court for the District of New Hampshire.

As previously reported, the court denied the company’s incentive and retention plan approval motion on Feb. 5. A motion by GT Advanced and its official committee of unsecured creditors for reconsideration of that order was denied on Feb. 11. GT Advanced subsequently appealed the bankruptcy court order.

Errors found

In Tuesday’s order, judge Landya McCafferty said “the bankruptcy court’s failure to properly analyze the structure of the compensation package in GTAT’s proposed KEIP is an error of law that requires remand.”

On remand, McCafferty instructed the bankruptcy court to determine whether the proposed KEIP has sufficiently stringent metrics to qualify as an incentive plan for the purposes of section 503(c) of the Bankruptcy Code.

In addition, the judge said the bankruptcy court only considered one of six factors that are typically considered when deciding whether a key employee retention plan is “justified by the facts and circumstances of the case.”

On remand, McCafferty instructed the bankruptcy court to analyze the retention plan in terms of those factors and use the appropriate level of scrutiny.

Employee plan terms

GT Advanced said in its motion for approval of the plans that the revamping of its business is premised on the successful implementation of a comprehensive business plan for its operations.

The incentive plan and retention plan were designed to provide performance incentives for nine senior executive employees and retention incentives to 28 non-executive employees. If all key performance indicators were met at specified target levels, the expected cost of the incentive plan would be $2.28 million. The total cost of the retention plan, excluding a discretionary pool, will not exceed $1.41 million.

In addition, a discretionary retention pool not to exceed a total of $300,000 will be available for GT’s chief executive officer to award retention bonuses at his discretion on an as-needed basis for employees that are not insiders.

GT also asked to implement a 2015 management incentive plan, which would have applied to 173 employees other than those eligible for the incentive and retention plans. If performance objectives were achieved at the target level, bonus payouts under the management incentive plan were not to exceed $1.95 million.

GT said the court denied the retention and incentive plan motion because it said the retention plan would have no effect on the retention of key non-insider employees and because the incentive plan was a “disguised retention program ... because there was no evidence that the senior management employees would work harder with the modified KEIP in place.”

The company said its restructuring committee and board of directors believe that, without the retention plan, there is a serious risk of diminution in the value of GT’s estates by the loss of a highly skilled and unique work force.

Merrimack, N.H.-based GT Advanced Technologies is a provider of equipment and services that support the growth of the solar and LED industries. The company filed for bankruptcy on Oct. 6 under Chapter 11 case number 14-11916.

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